Tools

2012 DAA

Serial Entrepreneur

Michael Pape combines science and business in a quest to develop a new generation of disease-fighting drugs.

By Rebecca RolfesPhotos by Matthew Gilson Published: Fall 2012

When Michael Pape was a high school sophomore in Battle Creek, Michigan, his father had a heart attack. It didn't kill him, but it sparked a lot of changes in the family.

"We're a big Italian family," Pape explained. "Dad smoked, everybody ate too much. It had a dramatic impact on the whole family, the way we ate, the way we lived." Already fascinated by biochemistry (getting down to the molecular level of how a living thing works), as an adult Pape headed for the pharmaceutical industry and atherosclerosis research in particular. At the Parke-Davis unit of Warner-Lambert (now part of Pfizer, Inc.) he worked on the team that developed Lipitor - which Pape's father ended up taking to lower his cholesterol.

Pape's experience of working on drug discovery in big pharma led him in 1998 to start a biotech company at a time when the industry was in its infancy. Esperion Therapeutics, Inc., a developer of therapies to treat cardiovascular and metabolic diseases, was sold to Pfizer in 2004 for $1.3 billion. Today, Pape is cofounder of Chicago-based Orchard Venture Partners (formerly named Sigvion Capital), a venture capital firm that works in the area of medical sciences. He cofounded and currently heads as CEO one of Orchard's portfolio companies - Ann Arbor-based Nymirum, Inc., which has technology that helps develop drugs to treat diseases caused by dysfunctional human RNA.

Entrepreneurship combined his love of creating something from nothing and the possibility of doing more than one thing at the same time. There are two types of companies, "those that transform matter and those that don't," Pape said in an interview from his Ann Arbor office. "Medical device companies transform metals and plastic to make something new. Drug companies transform chemical structures to create new medicines. I enjoy the idea of making something new."

After the blockbuster sale of Esperion, Pape enrolled in the Booth Executive MBA Program North America for a what-now, midcareer check. On the first evening, the students stood up to introduce themselves; many had impressive titles. Pape simply described himself as a part-time assistant wrestling coach - he was the only one without a full-time job. One classmate, JP Fairbank, '06 (XP-75), said to himself, "This guy must have an interesting story, I have to meet him."

The two of them went out to dinner that night and began a conversation that has yet to end about how to fund innovation. As the quarter unfolded, Pape would fly in from Ann Arbor a night early so he and Fairbank could talk. They were both looking for what next, and together they founded Orchard. Fairbank, who previously spent a decade in investment banking and investment management, oversees the finance, investment, and operations half of Orchard while Pape leads research science.

At Booth, Pape "learned the language and the blocking and tackling of business," he said. "It put all the things I had learned into a language."

"There are very few people with his scientific ability who also understand business, who understand the critical importance of execution and capital efficiency," Fairbank said. "Big pharmaceutical companies constantly are trying to do what we've done. They need scientists who understand the bigger economic picture. In reality though it is a very rare combination. With Mike, he is a brilliant scientist who also is good on the business side."

Still, the business model for funding drug research can be daunting. It takes, for example, a minimum of $1 million to launch a development project and $30 million to $50 million to learn if a drug is safe and effective in a specific human disease population. But if it is successful, it can sell for billions. "You don't need many hits in the portfolio to do very well," Fairbank said. It is, in essence, the ultimate business: a legal monopoly with high pricing power. "The government gives you a number of years on your patent during which you own the market," he added, "and your product has a textbook inelastic demand curve."

Pape and Fairbank aren't interested in taking their projects all the way to Phase 3 clinical trials, where the most capital is needed. Pape's first company, Esperion, sold in Phase 2 trials, the simplest safety and efficacy testing on the smallest patient population. In a repeat of that performance, another of Orchard's portfolio companies is midway through Phase 2 trials and is valued at more than $1 billion by big pharma. Regardless of the potential upside, every entrepreneur spends hours fighting off the thousands of possibilities for failure: the financing strategy, the investors, the market, facilities, technology, employees, regulation, the cumulative weight of total responsibility. It is the quintessential monster under the bed. If you are a venture capitalist and entrepreneur, "you run through all the scenarios for every company," Pape noted.

Whenever Pape starts a new company he confronts the monster by thinking about baseball and Saint John of the Cross. A player who hits .300 generally is considered a pretty darn good hitter. He gets a hit three out of 10 times. The batter, however, rarely thinks about the hits; he thinks about his misses. And that brings him to Saint John of the Cross, a 16th century Catholic mystic, who spoke of "the dark night of the soul."

"There's this initial burst of excitement, novelty, possibility; and you are up to the plate," Pape explained, "and then you get to the other side of it where things don't go exactly as planned or how you wanted. There's the emotional drain of the inevitable setbacks. It's the ability to draw on passion borne out of an event like my dad's heart attack while being relentlessly positive that gives you the chance to succeed." ■